Axos Financial(US:AX)2023-01-27 00:12Financial Data and Key Metrics Changes - The company reported net income of $82 million and earnings per share of $1.35 for Q2 2023, representing year-over-year growth of 34% and 35% respectively [8] - Book value per share increased by 16% year-over-year to $29.79 at December 31, 2022 [8] - Net interest margin was 4.49% for the second quarter, up 23 basis points from the previous quarter and up 39 basis points from the same quarter last year [9][23] Business Line Data and Key Metrics Changes - Deposits increased by approximately 28% year-over-year to $15.7 billion, with checking and savings deposits representing 93% of total deposits [8][18] - Ending net loans for investment balance were $15.5 billion, up 2% linked quarter or 7% annualized [9] - Loan originations for the quarter were $2 billion, down approximately 22% from the previous year [13] Market Data and Key Metrics Changes - The company experienced a 3% linked quarter increase in deposits, with growth in small business and consumer deposits offset by declines in certain commercial banking channels [18] - Cash sorting by Registered Investment Advisors (RIAs) increased, leading to a decline in cash balances held at Axos Advisory Services [21] Company Strategy and Development Direction - The company is focused on maintaining strong net interest margins in a competitive deposit market through diverse deposit franchises [8] - Investments in technology and operational efficiency are expected to improve the cost structure of the securities business [28] - The company plans to launch a new version of its consumer app in summer 2023, enhancing financial planning and investment features [29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving mid-teens loan growth in the second half of fiscal 2023, despite a deceleration in loan growth during Q2 [17][39] - The company is well-positioned to weather economic downturns due to strong capital levels and a low loan-to-value strategy [32] - Management noted that the competitive landscape for deposits has intensified, leading to increased marketing expenditures [37] Other Important Information - The efficiency ratio for the banking business was 47.11%, a significant improvement from the previous quarter [11] - Noninterest income for the quarter was $28.3 million, down from $30.8 million year-over-year, primarily due to a downturn in mortgage banking [34] Q&A Session Summary Question: Margin normalization and future rate increases - Management indicated that the margin is expected to normalize lower but may have potential for upside depending on future rate increases [42][43] Question: Loan growth expectations - Management expects mid-teens loan growth for the second half of the fiscal year, with specific drivers identified [48][49] Question: Auto charge-offs and insurance recovery - Management clarified that there is a lag in recovery from insurance on auto charge-offs, which is recorded under banking service fees [52][54] Question: Competitive lending environment - Management noted that while some banks are pulling back, there are still opportunities for growth, particularly in jumbo mortgages and C&I lending [58][60] Question: Return on equity evolution - Management expressed optimism about the potential for higher returns on equity in the long term, driven by improvements in the securities business [63][64] Question: Digital asset strategy - Management is cautious about the digital asset space, monitoring regulatory developments and consumer interest before making further commitments [67][69]